Mark Achin Sells 3,600 Electric Motors Each Year

question 21

Multiple Choice

Mark Achin sells 3,600 electric motors each year.The cost of these is $200 each,and demand is constant throughout the year.The cost of placing an order is $40,while the holding cost is $20 per unit per year.There are 360 working days per year and the lead-time is 5 days.If Mark orders 200 units each time he places an order,what would his average inventory be (in units) ?

• A)100
• B)200
• C)60
• D)120
• E)None of the above

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Definitions:

Prior Service Cost

The cost associated with the increase in pension benefits related to years of service credited in a pension plan amendment.

Straight-Line Basis

A method of calculating depreciation and amortization by evenly spreading the cost of an asset over its useful life.

Pension Retirement Benefits

Long-term benefits or compensations provided to employees upon retirement, which may include contributions made by the employer to a pension plan.

U.S. Tax Laws

The body of laws governing federal, state, and local taxation in the United States, affecting individuals, businesses, corporations, and other entities.